DEA Sparks New Battle With Marijuana Extract Makers

The battle lines are heating up between the marijuana marketplace and the Drug Enforcement Agency.

Last Wednesday, the DEA slipped an update in the Federal Register that established a new drug code for marijuana extracts. The move panicked the industry, which is already nervous with the new administration coming in. Millions are at stake for several publicly traded companies that have invested years in marketing products based on the extract called cannabidiol, or CBD.

The DEA seemed to believe it was much ado about nothing and was merely a move meant to better track research into extracts separately from marijuana and better comply with international treaties. Russ Baer, a spokesman for the DEA said, “The FRN published earlier this week did not have anything to do with re-scheduling CBD or anything at all to do with hemp.”

However, fear that the new attorney general could reverse legalization efforts has the marijuana industry on high alert. For many, last week's move is seen as the first shot across the bow in the renewed battle over CBD.

A women promotes Hemp products used for medicinal use at the Cannabis World Congress in Los Angeles, California on September 9, 2016. / AFP / Mark RALSTON (Photo credit should read MARK RALSTON/AFP/Getty Images)

Attorney Michael Cindrich said, “I think the DEA is testing how this president's administration will respond to the marijuana issue. A push by the DEA to both regulate this and other related products is testing the waters as to the level of control.”

The ruling was initiated in 2011, but not finalized until now. Dr. Stuart Titus chief executive officer of Medical Marijuana Inc., a leading CBD product developer, agreed that the timing of the final ruling was interesting. “It was a back burner issue for the new administration and this may have moved it to a front burner issue.”

The marijuana plant contains two main compounds -THC which gives the effect of being “high,” and cannabidiol, or CBD, which doesn't have any psychoactive effects, but which researchers believe has medical value. CBD can be extracted not only from marijuana plants, but also hemp plants as well. The market for CBD products is expected to top $1 billion market by 2020.

Last week's change revived the conflict between the Hemp Industries Association and the DEA. Basically, the hemp folks believe that since hemp isn't specifically called out under the Controlled Substance Act (CSA), it's legal. The HIA stated, “Cannabidiol is not listed on the federal schedule of controlled substances.” The DEA disagrees and believes that because hemp comes from the same genus family of plants – it is.

“This is a huge step backwards for cannabis prohibition and especially for patients who live in states without established medical cannabis laws,” said Mark Malone, Executive Director of the Cannabis Business Alliance.

Producers of products made with CBD are fighting back. Dr. Titus said, “The ninth circuit court of appeals has conclusively held that hemp products such as those marketed by the company [Medical Marijuana] which are derived from the part of the cannabis plant, which is exempt from the controlled substances act is legal for import from Europe.” Dr. Titus stresses its product are legal. Titus is referring to a 2004 court case that the HIA won against the DEA.

The court ruled that hemp was not a schedule one drug and that the DEA had no authority to regulate drugs that are not scheduled. It also said that industrial hemp was legal to import and sell in the U.S.

The DEA said it established the new internal drug code for marijuana extracts (which includes, but isn’t limited to, CBD) as a means to more easily and accurately track scientific research on cannabis. "Creating an internal record-keeping system allows us to distinguish the extracts from other parts of the cannabis plant and ultimately makes our work more efficient," said Baer.

Ultimately, the DEA can't create new laws, they can only enforce existing laws created by Congress. However, by making an administrative change, like updating codes, they can then include a product that hadn't been defined or included before. The CBD producers believe that this is overstepping by the DEA.

The HIA stressed that the new code did not change the status of CBD, but they did express concerns about the final rule. They stated, “DEA's addition of unscheduled substances to the Administration Controlled Substances Code list is problematic. Substances that have not been properly scheduled should not be on the list as this can create confusion in the marketplace and also result in other federal agencies improperly treating legal substances as controlled.”

There are hundreds of CBD products on the marketplace and the DEA believes every sale is an illegal one. That strikes up the fear of seizures of assets, which the DEA says won't happen because it has other enforcement priorities. So for now the customers and producers can continue business as usual. Many though fear this is just the beginning of a new attack on legalization efforts.